Purchase Plus Improvements Mortgages
If you’re currently looking for a new home and like the idea of finding something you can make your own with a few renovations, the Purchase Plus Improvements (PPI) mortgage is definitely something to consider. When we bought our home we knew we wanted an older property that needed work, so it was a no-brainer for us to go with a PPI mortgage so that some of the renovation cost could be added to our mortgage. There were still a lot of ins and outs we didn’t know about at the time, and that’s why having your home-buying dream team set up before you even start the search is so important.
One member of that dream team is your mortgage broker, and so I asked Edmonton and area based Angela Craig to join me as a guest contributor to share more information on this option for your mortgage! Take it away, Angela!
What is a purchase Plus Improvements Mortgage
First-time home buyers are often unaware of the various mortgage products available to them, some of which can assist in the final decision of which home to purchase. When beginning the search for that dream home, you may find yourself in the situation where the perfect house that is within your budget may require updated flooring, a new roof or even an entire kitchen makeover. You may think that it is out of your reach, as you would have to save up even more money for the costly repairs or renovations.
But, fret not! There is a product called the Purchase Plus Improvement mortgage. This type of mortgage allows you to add improvements up to:
20% of the purchase price, up to $40,000, for high ratio mortgages. (Down payment amount less than 20%.)
OR
20% of the purchase price, up to $60,000 for conventional mortgages. (Down payment at 20% or greater.)
Things to remember for the mortgage process
Reach out to a mortgage broker first! It is always best to get fully pre-approved up front to ensure there are no last minute surprises!
You will need to qualify for the final mortgage amount with improvements, not just the purchase price.
The down payment will be a minimum of 5% of the total value including improvements (and for anything over $500,000 you will need additional down payment).
The lender will require quotes for the work that will be completed, and these need to be submitted BEFORE they will approve the mortgage.
There will be an additional inspection required to ensure all work is completed before the remaining funds can be released.
Two items to note with this type of mortgage product are that you do not get the improvement funds up front, and all of the work typically needs to be completed within 90 to 120 days of the closing date of your new home. Some contractors will require a deposit up front, and all of this needs to be discussed and negotiated up front. You can also combine a CashBack mortgage with a Purchase Plus Improvement mortgage, so if funds are not available upfront for the deposits, you still have options.
How to get started
The best way to get started is to first reach out to your mortgage broker. We are here to ensure that you are educated on all of your options and know exactly where you stand. Secondly, find a trustworthy realtor that understands your needs and can steer you in the right direction to finding an older home with a good foundation. And finally, be sure to get your favourite interior designer, Kierstin Smyth, involved early on to help you with the planning and quoting process. Having a team of qualified professionals on your side will ensure that this is an enjoyable process from start to finish.
Refinance Plus Improvements
Already own your own home, but want to do renovations? We have solutions for that as well! Similar to the Purchase Plus Improvements, we also have the Refinance Plus Improvements. This will allow you to take up to 80% of the equity from your home and combine it with an Improvements amount. This is a great option for those looking to do a larger renovation; it will ensure that you have sufficient funds for that new kitchen! As always, the first step to any new home purchase or renovation is to reach out to your mortgage broker and get pre-approved so you know your options and can plan accordingly.
Thanks Angela! Definitely one of the items I’ve personally seen cause home-buyers grief is the timeline by which the work has to be completed. This is also why it's important to have your designer on your team early - so that the items or elements you’re including in the improvement funds can be planned ahead and actually be completed on time. If the work you’re doing requires permits, that means you need to have your plans in as soon as possible after taking ownership of the house, as this can often take a month or longer to process. And then surprises, such as at my own home where the asbestos removal turned out to be far more extensive than originally anticipated, can cause additional delays and reprioritization of time and effort. And don’t even get me started on the supply chain issues that exist right now!
All that being said, the Purchase Plus Improvements mortgage is an amazing option that should be considered when you’re looking for a place that needs some work. Angela and I are here to assist (and between the two of us we can recommend some amazing realtors too) to ensure the whole process is as seamless as possible!
Angela Craig a licensed mortgage broker with Axiom Mortgage Solutions, providing tailored mortgage advice for her clients. Prior to becoming a mortgage broker, she used her accounting background in Project Controls to track costs, plan and progress field updates, and create and maintain project schedules. She loves to help people solve their financial problems and accomplish their goals.
She can be reached at angela@tailoredmortgages.com or through her website at https://tailoredmortgages.com